Under the terms of the settlement, which was approved today by a 6-3 vote, the city would amended its 20-year tax abatement with Hovnanian by reducing the developer’s annual service charge to the city from 16 to 11 percent of its annual gross revenue for the first three years of the deal.

The new deal will cost the city nearly $900,000 in revenue over the three years, according to city spokeswoman Jennifer Morrill.

Hovnanian says sales at 77 Hudson St. have “languished,” with more than 85 units unsold, according to the city.

The change would only affect units unsold as of July 18, 2012, according to the proposed settlement agreement.

Hovnanian asked for the amendment in 2009 to “level the competitive playing field,” its attorney said at the time. The city, which denied Hovnanian’s request then, had previously granted a deal to the developers of the 269-unit Crystal Point condo building on Second Street that was identical to the one requested by Hovnanian.

Council members Steve Fulop, Rolando Lavarro and Viola Richardson voted against the settlement, which needs another council vote before it is finalized.

Corporation Counsel Bill Matiskoudis told the council on Monday that he wants to settle the dispute because he believes the judge in the case has indicated “some favorability” toward Hovnanian’s claims.

Matsikoudis said the city could lose "significantly more" than $900,000 if it proceeds with the suit and loses.

The suit was originally thrown out at the trial-court level, a decision overturned by an appellate court, which sent the case back to the lower court for review.